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Coca-Cola on thinking like a start-up, open innovation and avoiding ‘Kodak moments’

By Elaine WATSON , 14-Nov-2012

Lewis: We're an easy target
Lewis: We're an easy target

Coca-Cola has to "think and act like a lean start-up company" if it wants to stay ahead of the pack, using its Venturing and Emerging Brands (VEB) arm to make "more, earlier bets" to find the next big thing in beverages, says its procurement boss.

Speaking at the Supply Side West trade show in Las Vegas last week, Coca-Cola chief procurement officer Ron Lewis said Coke is on a mission to double the size of its business by 2020 (vs 2009), which would require “disruptive innovation, by which I mean [innovation that’s] new to the world, not just new to Coca-Cola”.

Our goal is to be the best at innovation in the industry and the way we’re going to do that is via an open network

And there is a good chance that the source of such innovation may well come from outside Coke’s R&D department, he said.

Indeed, as a fan of open innovation, Coca-Cola is well aware that it doesn’t have a monopoly on good ideas and that the best ones “won’t always come from within the four walls of our supply chain”, he added.

Our goal is to be the best at innovation in the industry and the way we’re going to do that is via an open network. We want to be the best at connecting the dots.”

Every leader is at risk of having that Kodak moment

Coke's VEB group, which was set up to identify the next generation of brands with billion-dollar potential, needs to make "more, earlier bets", he said.

"Instead of making huge bets, let's make more smaller bets, and let's make them earlier, and if we're going to fail, let's fail fast."

The take home is that there is no room for complacency when you are number one, he said, reminding his audience how Kodak had seen its market share collapse as the market switched from photographic film to digital technology.

“I wonder when is the last time any of you brought a roll of film to be developed at your local drugstore? It’s a sobering thought.

“Every [market] leader is at risk of having that Kodak moment… We don’t want to get behind the trends. You innovate or you die.”

Growth and sustainability can go together

Dedicated to discovering and developing the most innovative emerging beverage brands, and describing itself as “part investor, part think tank”, Coke’s venturing and emerging brands arm is looking for an “outstanding proof of concept (including strong revenue, distribution and consumer traction); an authentic brand story; a unique product with competitive advantage; a strong management team; and great taste”. Recent investments include Honest Tea, Zico and Cascal.

Much of Lewis’ presentation was devoted to sustainability initiatives at Coca-Cola, from its PlantBottles to new electric trucks.

Above all, sustainability is “not something to tick off a check list but something that’s core to our business continuity and survival”, said Lewis.

“Growth and sustainability can go together. They are both strategic priorities for our business.”

While this is a commercial necessity, as companies are under pressure to do more with finite resources, it is also essential if Coca-Cola is to have credibility with consumers, who expect trusted brands to do the right thing, and will punish those that get it wrong, he said.

“When consumers see a brand that’s associated with a good cause they will switch 62% of the time [if all other things are equal],” he said.

An easy target?

Finally, moving onto the issue of health and wellness, companies the size of Coca-Cola also have to take the lead by ensuring their communications are science-based and giving consumers the information they need to make informed choices, he said.

However, many politicians see the soft drinks industry as an “easy target”, developing “short-sighted policies” such as soda taxes or limits on beverage serving sizes “to address budget shortfalls and health issues such as obesity”, without basing their actions on scientific evidence, he claimed.

“We need to make sure that [such policies] are fact-based and not driven by a particular agenda.”

Coca-Cola - which was recently targeted (although not named) in a hard-hitting video by the Center for Science in the Public Interest featuring diabetic bears guzzling soda - is committed to transparency, he claimed.

“More than 25% of our products are low or no calorie. We also sell a variety of pack sizes. It’s about making informed choices. It’s about transparency. Consumers want to know what’s in their products. We include calories on the front of every pack.”